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Joint ventures are a special category of partnership used to describe situations where two or more businesses agree to work on a project together with a view to achieving a better result than going it alone.
This is not a legal definition , and unlike the Companies Act 2006 or the Partnership Act 1890, there is no equivalent Joint Venture Act. Indeed, virtually any relationship where two or more parties agree to work or collaborate together could be described as a joint venture of sorts. So joint ventures can include:
Getting started on a Joint Venture
When commencing a joint venture the process should be similar to when commencing a business without the collaboration i.e. the joint venture should be supported with a robust business plan that can document the venture as being a viable investment.
We also recommend the more solemn side to the legalities are considered from the very beginning. So before any detailed discussions where ideas and know-how is exchanged a confidentiality agreement should be entered into. A joint venture solicitor will be able to advise on a suitable document.
Assuming, there is a hand shake in principle between the parties to move forward, then a memorandum of understanding or letter of interest may be a helpful start. This is a short document documenting which endeavours to blueprint the headline terms of the joint venture. Apart from certain aspects such as confidentiality, a memorandum of understand or letter of intent is not intended to be a legally binding agreement. Although preparing these documents can add an extra layer of cost, they are a helpful way of teasing out potential issues before commencing the work on the longer form more comprehensive joint venture documents.
Forming a Joint Venture
Joint Ventures may take a number of different legal forms from the creation of a new legal entity jointly owned and managed, or through an agreement to co-operate.
If a new legal entity is to be created then this is likely to be either:
However, there are a number of other more specialist vehicles that can be created depending on the type and location of the joint venture.
If the joint venture is to be setup on the basis of an agreement alone, the main motivating factor is likely to be independence i.e. the parties to the joint venture are not scrambling their business eggs. Accordingly contractual based joint ventures will be suited to short term or one-off projects.
Joint Venture Agreement
The joint venture agreement will be similar to a shareholders agreement or a partnership agreement, in that it will document the following key matters:
In addition to the main joint venture agreement there may be a number of additional agreements required such as the licence of intellectual property, or the assignment of goodwill.
The preparation of a joint venture agreement should be regarded as a process, undertaken in conjunction with a joint venture solicitor, as well as with tax and other specialist advisors.
For expert joint venture advice contact us by telephone on (020) 8275 0446 or by email at firstname.lastname@example.org.